Grounded Goyal looks to reboard, may bid for Jet

SBI chairman Rajnish Kumar had said last month, “It could be financial investor, it could be airline... including Naresh Goyal himself or Etihad. Nobody is barred from bidding or taking over the airline as per the rule.”

Mumbai: Jet Airways promoter Naresh Goyal is planning to submit a proposal for regaining control of his company after stepping down under pressure from lenders. There is no legal restriction on Goyal bidding for his own airline.

SBI chairman Rajnish Kumar had said last month, “It could be financial investor, it could be airline... including Naresh Goyal himself or Etihad. Nobody is barred from bidding or taking over the airline as per the rule.”

Among those who have made enquiries for Jet include Etihad and Air Canada. Those interested in acquiring the airline can apply by email until Friday evening. Bankers say that they will be able to take a call only after examining all bids.

Reports of Goyal’s planned bid drew mixed reactions from bankers, none of whom wanted to speak on record. According to a lender with a small exposure to Jet Airways, the objective of the resolution was to come out with a solution like the National Company Law Tribunal (NCLT) process under the bankruptcy code. The resolution was being done outside the insolvency process to ensure that operations are not affected. Allowing Goyal to get back the airline with debt relief would go against the spirit of IBC, he said. Banks have a total exposure of over Rs 8,000 crore with State Bank of India (SBI) and Punjab National Bank (PNB) leading the consortium.

However, another lender said that there was nothing barring lenders from considering a proposal from Goyal as he was not a wilful defaulter. Lenders had appointed Ernst & Young to conduct a forensic audit, which had not come out with anything adverse. Also, since the process was outside the Insolvency and Bankruptcy Code (IBC), there was no problem in restructuring the loan as long as all lenders agree. He added that one of the proposals being discussed was purchases of loans from banks outside the consortium to ensure that all lenders are on the same page and the airline is not dragged to NCLT. Some lenders outside the consortium have extended loans to the company against the security of the aircraft.

Meanwhile, SBI has approached the finance ministry and said that it should not be left only to lenders to get the airline back on its feet. The bank has indicated that other government agencies, to whom Jet Airways owes money, could improve chances of their recovery by making some sacrifices. According to bankers, in an IBC process, the operational creditors are lower down in priority compared to lenders. But here, they are asking for payments in full.

So far lenders have been betting on Etihad showing interest once Goyal steps down. Sources said that the expression of interest (EoI) document was drafted keeping in mind Etihad eligibility and lenders have not insisted on a profitability track record. However, Etihad’s investment vehicle EA Partners has lost money in its earlier airline investments and is wary of committing additional funds. According to bankers, while many private equity investors have made casual inquiries, Air Canada and Etihad appeared to be serious contenders.

Goyal’s proposed bid is seen as mysterious since it was his inability to bring in any capital that compelled him to pledge 26% shares and lose management control. Lenders are curious to know Goyal’s source of funds. While banks are willing to provide emergency funding and restructure loans, they do not want to do that until someone agrees to bring in equity capital. If no equity investor emerges, lenders may have no choice but to initiate proceedings in the NCLT.

A recent Allahabad high court judgment may, however, provide some relief with the court ruling that there shall be no tax levied in case of purchases made at duty free stores at the arrival or departure terminals.